Trump’s Elimination of USAID: What it Means

The elimination of USAID was a foretold disaster, and the news came out yesterday. US Secretary of State Marco Rubio announced that following Elon Musk’s DOGE expedited review, of the over 6,000 programs that constituted USAID’s work, only about 1,000 remained, or about 18% of the agency’s total budget.

He further clarified that he would take those remaining programs into the State Department, although what they consist of, at this point in time, nobody knows. Trump’s administration is stunningly opaque about what it is actually doing. All one is told is that everything is torn down, the Federal government is kaput.

So that was the end of USAID, America’s prime instrument for promoting its “soft power” — the carrot to its military stick. Consider that it played a key role in ensuring America’s leadership in the post-World War II order established at Bretton Woods. With USAID gone, America, the primary country guaranteeing the international system, including the United Nations, the World Bank and the IMF, has bowed out of the world scene.

The demise of USAID is only the most recent in a series of steps that began when Trump withdrew America from the World Health Organization. Thus, the elimination of USAID should come as no surprise. It was the logical closure, and, incidentally, one that must have immensely satisfied Musk’s South African heart: As a white South African immigrant, he’d already made sure Trump would sign an executive order giving priority to his fellow white co-nationals wishing to live in America. But that wasn’t enough. His real target was USAID, an agency accused by white extremists in South Africa of having committed the irredeemable sin of supporting the fight against apartheid.

With USAID gone, America withdraws from the world stage: What it means

Let’s be clear: With USAID, America’s major soft power weapon gone, the “Pax Americana” is over. This is indeed a new world order, and as is always the case when something as portentous as this happens, it starts with disorder. Trump’s chaos. Russia’s Putin and China’s Xi-Jinping must be smiling ear-to-ear. This is a fantastic opportunity for them.

Now, at last, the way is open for Russia to claw back the whole of Eastern Europe, starting with Ukraine of course, but also the Baltics, Poland, and more. Of course, among them are Hungary and Serbia too, but those countries, along with Slovakia, are already in his pocket. He can take his time, and no doubt he will, because with America gone from the European scene, the way is indeed wide open.

At the other end of the Eurasian continent, China is poised to make huge geopolitical gains. This shift comes at the right moment, just as its Belt and Road Initiative (BRI) was faltering as it faced post-Covid headwinds and “debt-diplomacy” accusations (whereby some countries are reportedly taking unsustainable levels of debt to finance projects).

One can imagine the Chinese tiger licking its chops and eyeing Taiwan. Will Trump react and stop China as all his predecessors have done? Not likely. Defending a small country that has taken the chips industry away from America is, in Trump’s MAGA eyes, an enemy. Just like Canada and Mexico, America’s closest neighbors, are now enemies, worthy targets for trade wars.

What about the European Union? Here too, European political leaders are reacting faster than ever before. One iconic image summarizes the European reaction: UK’s Prime Minister Keir Starmer’s embrace of Zelinsky after he’d been publicly insulted and demeaned by Trump and his sycophant J.D. Vance in a press conference at the White House. Trump himself remarked it made for a great TV show. But that show was not appreciated in Europe as Europeans view Zelinsky as Ukraine’s Winston Churchill, bravely battling alone a ruthless dictator bent on conquering Europe and bringing down democracy and freedom.

Will a Pax Europea replace the Pax Americana?

A preliminary step has been taken: ReArm Europe, proposed by the President of the European Commission, Ursula von der Leyen. It has a short-term aspect: aid Ukraine. And a long term aspect: Build up Europe on the international stage by first securing it militarily. Foreign policy with a focus on sustainability and human rights is meant to follow.

“Europe is ready to massively boost its defence spending. Both, to respond to the short-term urgency to act and to support Ukraine but also to address the long-term need to take on much more responsibility for our own European security,” von der Leyen said in a statement (bolding added).

The real question is how will this ambitious plan be achieved?

With REARM Europe, von der Leyen hopes to mobilize up to 800 billion euros to strengthen Europe’s defence infrastructure. Mirroring how the EU raised funds for the post-Covid19 recovery, the plan starts with the EU Commission setting up a new European defense instrument, a €150 billion defence fund by borrowing from the markets, and from which member states can, in turn, borrow.

The idea behind this instrument, which could be similar to the post-Covid Recovery Fund, is that the loans should be for joint purchases to upgrade a European network of anti-aircraft defense systems, anti-drone systems, cyber and cyber defense systems, as well as purchases of missiles and ammunition with which also to help Ukraine through artillery supplies.

Furthermore, the plan is for the EU Commission not only to guide military expenditures, ensuring they are aligned with NATO but also to push for collaboration between EU members, calling for coordinated purchases.

The difference with the Recovery Fund is that this time, the money would be distributed as loans rather than grants. And unfortunately, that is not welcome by frugal states, like Germany and the Netherlands who are always worried about staying out of debt.

On the positive side, von der Leyen proposes to activate the escape clause of the Stability and Growth Pact that provides fiscal flexibility to countries burdened by debt. This means that REARM Europe loans shall be exempt from the limits placed by the Pact on the national debt.

So expect a long and hard fight in the European Parliament before ReArm Europe sees the light of day.

But are those who are afraid of loans and having to give money back to private investors right? Will countries be unable to pay back those defence loans?

The truth is that military expenditures are enormously lucrative investments: Consider the immense benefits America, the most militarized country in the world and the mightiest, has drawn from its military investments. The DARPA and NASA combo has given rise to the Internet and the digital age, turning America into a world leader in tech, electronics, and AI. The entire world envies Silicon Valley, which has become a goal for any country wishing to “catch up.”

If it weren’t for all those military expenditures and Federal government support for science and research, America would not be where it is today. It would be mired in a post-industrial mature economy burdened by a 19th-century industrial legacy, just as Europe is today.

So, REARM Europe is a unique chance for Europe to emerge on the global stage and set up a Pax Europea to replace the Pax American. But that will only happen if it is properly rolled out, with strong, continuing support for basic research and science. Europeans need to beat the Americans on every front, and that includes digital tech and AI. Brainpower has always existed on the European continent, in its top universities, and there has always been a European brain drain toward the U.S. because American labs and salaries were better.

To make that stop, it will be necessary for REARM Europe to ensure that all purchases are local: Every Euro should be spent on European-made equipment and none should go toward the purchase of American products. For example, for decades, the Italian government has regularly purchased its military planes from the US instead of, say, France even though French planes are equally good. Why is that?

Time to radically change purchasing habits and stop buying American. That is the kind of behavior REARM Europe must promote. Otherwise, the expected multiplier effect on the European economy won’t happen. Yet that spurt in economic growth will be essential to make it easy and painless to repay those defense loans.

What is wrong with the MAGA agenda and why sooner or later it will fail

America is a vast country, and despite its brilliant Silicon Valley hotspots, it has, just like “old Europe,” parts of it mired in a grim industrial past: Notably, the Rust Belt.

The unhappy, Fentanyl-addicted people who live there are the ones that Trump has exploited to gain their vote, making them false promises of “millions of jobs” and a “boom like never before” — when in fact, his trade wars on erstwhile partners, far from bringing “business back home” actually threaten recession.

A fact Trump himself recently admitted: Admitting “recession” was in the cards, he sent Wall Street and the stock markets around the world into a tailspin. Because when you demolish the Federal government structure and the rule of law, you kill “trust” in a society.

With trust gone, economic instability becomes the new normal. Francis Fukuyama famously demonstrated this in his 1996 best-selling book Trust: The Social Virtues and the Creation of Prosperity, which explores the crucial role of social capital in economic and social development. He addresses the potential negative consequences of excessive individualism, particularly in American society, and warns that a decline in social trust can lead to social fragmentation and economic decline.

Social fragmentation and economic decline is precisely what threatens Trump’s America.

No investor worth his salt will venture into the kind of chaotic world Trump’s executive orders is creating, with rules-based social life gone and the Federal government reduced to a ghost of itself. Even the IRS now has too few personnel to handle the incoming tax returns!

So yes, there will be a recession coming soon in America, and both Bloomberg and Morgan Stanley have already predicted it.

This is both bad news and good news.

Bad because a recession in the world’s largest economy is bound to ricochet around the world, causing economic pain.

Good because it is a political opportunity for the countries quick enough to catch them. Russia is embroiled in war, so it is not likely to be able to make much of this opportunity except for continuing on its warpath. But for China, which is at peace with the world, this is a golden economic opportunity to expand its markets outside of the US.

And Europe? It should do the same as China: Expand its ties with trade partners around the world and fight against climate change and the destruction of the environment. And it should do more: Support sustainability and human rights and take over the the slack in the international system wherever America gives up and retreats. Systematically take over USAID projects. For example, in the area of global public health, rush in to provide funding to WHO for pandemic prevention and preparedness programs and other aid programs.

Europe should not stop there. In every domain, from tech to AI, it should seek to fill all the gaps Trump’s America is leaving behind, following exactly the path drawn in Draghi’s report and von der Leyen’s EU Compass to regain competitiveness.

Europe’s and the world’s sustainable future and welfare depend on it.

Whether the EU can do this or not remains to be seen. But there’s hope that with the new German Chancellor Merz and French President Macron we will again have the German-French providing strong guidance for Europe.

Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — Cover Photo One of the many meetings between EU Commission president von der Leyen and Ukraine president Zelensky, this one on February 2, 2023. Credit: Audiovisual Service European Commission (Dati Bendo) By © European Union, 2025, CC BY 4.0